ChevronTexaco Reports 4Q Net Income of $3.4 Billion

ChevronTexaco (NYSE: CVX) reported net income of $3.4 billion ($1.63 per share - diluted) in the fourth quarter 2004, closing out the strongest year in the company's 125-year history. Net income in the fourth quarter 2003 was $1.7 billion ($0.82 per share - diluted).

The 2004 quarter included special-item gains of $146 million, compared with $89 million a year ago. Foreign currency effects reduced earnings $54 million and $171 million in the corresponding periods.

For the full year, net income was $13.3 billion ($6.28 per share - diluted), compared with $7.2 billion ($3.48 per share - diluted) in 2003. Net income for 2004 included $1.2 billion of net special-item gains, primarily from the disposition of producing properties. Earnings for 2003 included net special charges of $53 million.

                               Earnings Summary

                                       Fourth Quarter             Year
    Millions of Dollars              2004         2003       2004       2003

    Income From Continuing Operations --

     By Major Operating Area (A,B)
      Upstream -- Exploration
       and Production              $2,227       $1,562    $ 9,490     $6,359
      Downstream -- Refining,
       Marketing and
       Transportation               1,076          233      3,250      1,167
      Chemicals                        75            3        314         69
      All Other                        62          (70)       (20)     (213)
       Total                        3,440        1,728     13,034      7,382
    Income From Discontinued
     Operations -- Upstream (B)        --            7        294         44
    Cumulative Effect of
     Changes in Accounting
     Principles                        --           --         --      (196)
    Net Income (A,B)               $3,440       $1,735    $13,328     $7,230

    (A) Includes foreign
        currency effects             $(54)       $(171)      $(81)    $(404)
    (B) Includes income (charges)
        from special items:
          Continuing Operations      $146          $89       $905      $(53)
          Discontinued Operations      --           --        257         --
            Total                    $146          $89     $1,162      $(53)

"Our fourth quarter performance capped a year of record earnings for our company and reflects the focus on executing with excellence by our thousands of employees worldwide," said Chairman and CEO Dave O'Reilly. "Upstream results in the quarter benefited from strong prices for crude oil and natural gas. Earnings in our downstream business improved significantly over last year's quarter, as we continued to experience higher industry demand and improved margins for refined products worldwide."

O'Reilly added, "We achieved a strong 26 percent return on capital employed for the year, continuing to make significant strides compared with our major competitors in this important measure." O'Reilly also noted the total return to the company's stockholders during 2004, comprised of stock appreciation and the reinvestment of dividends, was over 25 percent, well above the S&P 500 benchmark return of 11 percent.

"In upstream, we're seeing major progress in achieving our strategic objectives to grow profitably in our core areas of operation and to build a global gas business that will commercialize our significant international gas resource base," O'Reilly commented. He also remarked on a number of strategic milestones and operational successes in recent months for upstream and global gas:

-- Production of first oil at the Bomboco Field located in the Block 0 concession, offshore Angola, which is part of the company's Sanha-area development.

-- Usan-6 appraisal well offshore southeastern Nigeria, representing a significant extension in the area west of the Usan Field in deepwater Oil Prospecting License 222.

-- Agreement with other shareholders of the West African Gas Pipeline Co. Ltd. to move forward with the construction of a pipeline to be used for the transportation of natural gas more than 400 miles from Nigeria to customers in Ghana, Benin and Togo.

United Kingdom
-- Oil and gas discovery at the offshore Rosebank/Lochnagar well in the Faroe-Shetland Channel in the U.K. North Sea.

-- Loran 3X natural gas discovery well in Block 2 of the Plataforma Deltana region, offshore Venezuela. This well extended the area of natural gas discovered previously at Loran 1X and 2X.

North America

-- 20-year agreement securing regasification capacity of 700 million cubic feet per day at the planned Sabine Pass LNG terminal in Louisiana.

-- Permit received from the Mexican Regulatory Energy Commission for a proposed natural gas import terminal off the coast of Baja California. The company was also notified by the Mexican Communication and Transport Secretariat as having won the public licensing round for the terminal's construction and operation. This system will be capable of offloading, storing and regasifying LNG shipped from the Asia-Pacific Basin.

-- Announcement of plans to submit federal and state permit applications to locate an LNG import and regasification terminal at the company's refinery in Pascagoula, Mississippi.

-- Full design capacity of the Caspian Pipeline Consortium pipeline was reached in early 2005 following receipt for the first time of oil that was produced in Russia.

In additional comments on results for the company's downstream operations in 2004, O'Reilly said, "Earnings in 2004 for our downstream businesses reflected a strategic focus on our company's geographic areas of market strength, especially the Asia-Pacific and the U.S. West Coast and Sunbelt regions." O'Reilly said successes in recent months included:

-- Resumption of gasoline marketing under the Texaco retail brand in the United States in mid-2004. By the end of the year, the company was supplying more than 1,000 Texaco retail sites, primarily in the Southeast, and plans to supply additional sites in the Southeast and West during 2005.

-- Preliminary agreement for a business partner in China to take a majority interest in the company's existing joint venture that operates retail service stations in South China, as part of an overall plan to expand the company's presence in China.

O'Reilly also remarked on the strength of the company's cash flows during 2004 and the balance sheet at the end of the year. Asset sales in 2004, primarily upstream properties and downstream service station sites, resulted in cash proceeds of $3.7 billion. In combination with strong cash flows from operations, the company was able to reduce its debt balances by $1.3 billion and thus lower its debt ratio from 26 percent to 20 percent, repurchase $2.1 billion of the company's common shares in the open market and contribute $1.6 billion to employee pension plans. The company also increased its quarterly dividend 10 percent -- marking the 17th consecutive year of higher dividend payouts to stockholders. At the end of the year, cash and marketable securities balances were $10.7 billion, up $5.4 billion from the end of 2003.

In closing, O'Reilly said, "Our company's 125th anniversary in 2004 was marked with many successes, both operationally and strategically. We've built tremendous financial strength and have a solid foundation of future growth projects, as evidenced by our recently announced 2005 capital and exploratory budget of $10 billion. Considering both of these factors, I am very optimistic about our company's ability to continue creating value for our stockholders."